International Debt Defaults

With Greece standing on the lip of a debt default and the resulting bond pressures that will bring, Niall Ferguson gives a ‘big picture’ vision in this interview.

He also points out the likely scenario for world-wide interest rates, as these are a function of the bond markets. With an increasing number of international debt defaults will come a demand for increasing bond rates. With the increasing bond rates comes increasing interest rates.

Niall points this out correctly and also indicates that the window of opportunity for the continued low interest rates that we have seen will only persist for a few more years.

What does this mean for ‘the little guy/gal?” Watch your debt to earnings ratio = too much debt now can spell your doom when the rate of interest you pay for that debt starts to rise.

Further, you may want to examine your debt margins and where possible either lock in for long term at low rate or have a ‘flow lock’ where you will have time to react to the rising interest rate challenge on your floating paper … soon such things as ‘variable’ rates will become the bane of business and commercial real estate.

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